NEW YORK, Jan. 25, 2018 /PRNewswire/ -- Marathon
Partners Equity Management, LLC, a New
York-based investment firm, and its affiliated investment
funds (collectively "Marathon Partners"), which beneficially own
approximately 6.3% of the common stock of J. Alexander's Holdings,
Inc. ("J. Alexander's" or, the "Company") (NYSE: JAX), issued the
following statement today in response to leading independent proxy
advisory firm Glass, Lewis & Co., LLC ("Glass Lewis")
recommendation that J. Alexander's shareholders vote against the
Company's proposed acquisition of 99 Restaurants, LLC ("99
Restaurants"). A special meeting of shareholders to vote on the
proposed merger is scheduled to be held January 30, 2018.
Mario Cibelli, managing member of
Marathon Partners, issued the following statement:
"We are pleased to learn that Glass Lewis has joined ISS in
recommending that shareholders of J. Alexander's vote against the
proposed acquisition of 99 Restaurants. That the two leading
independent proxy advisory firms have come out against this
transaction is telling indeed. Like ISS, Glass Lewis
expressed similar concerns as ours with the closed, conflicted
process by which J. Alexander's conducted merger negotiations and
its failure to assure shareholders that this transaction represents
the most favorable opportunity available. Glass Lewis further
echoes our disappointment that J. Alexander's did not form a
special committee of independent directors to evaluate this
inequitable transaction, even though every single one of its board
members currently has or has had conflicted relationships with 99
Restaurants' parent company or its affiliates, Fidelity Newport
Holdings, LLC and Fidelity National Financial, Inc."
Mr. Cibelli continued:
"And if it were not enough that the deal process was rife with
conflicts of interest, even the Company's latest press release
touting shareholder support includes a conflicted
shareholder. It is disingenuous for the Company to flaunt
Newport Global Advisors' support of the transaction when
Newport is not even qualified to
vote on what is arguably the transaction's most significant
proposal – the approval of the merger by disinterested
shareholders. We will be following both Glass Lewis and ISS's
independent recommendations by voting against this acquisition to
ensure that we, along with other long-term holders of the Company's
shares, receive the value we deserve for our investment. In
the event that this poorly structured deal is rejected, we plan to
urge a review of all strategic alternatives to maximize
value. The Company still has not revealed the material
financial metrics that were omitted in its recent disclosure to
investors regarding 99 Restaurants' same store sales, profitability
and margins, and J. Alexander's preliminary financial results for
the fourth quarter of 2017. How can shareholders make an
informed decision on how to vote when they are not privy to how J.
Alexander's performed compared to 99 Restaurants? This is
especially alarming in light of the significant dilution in
ownership that would result from the approval of this transaction.
As before, we reaffirm that full disclosure of the Company's
financial results will allow shareholders to make an informed
decision on whether independence is a better path
forward."
Mr. Cibelli concluded:
"We believe it is obvious that this transaction is not in the
best interests of shareholders. From the flimsy pro-forma
results touted by management to the unusual negotiation of J.
Alexander's giving away a "no-shop" provision on itself to the
sellers, it is clear that the Company's shareholders have not been
prioritized by the board. We believe J. Alexander's fair
value is significantly higher than the $11 per share used to underpin this entire
transaction. The board of directors has allowed for a change
of control of the company, but has delivered no premium to
shareholders to compensate them for what they are giving up.
Poor corporate governance and a conflicted transaction has
created this potential outcome. We urge shareholders to
reject this transaction and send the directors back to the board
room to discuss anew how to best serve J. Alexander's owners."
Key Excerpts from the Glass Lewis Report Recommending that J.
Alexander's Shareholders Vote Against the Proposed Acquisition of
99 Restaurants*:
- "Overall, we believe there are sufficient concerns with the
proposed transaction to suggest that the transaction agreement in
its current form is not in the best interests of shareholders. We
find that the board failed to establish a committee of independent,
disinterested directors to evaluate the propose transaction and
also failed to review potential strategic alternatives before
entering into the transaction agreement. We find these issues
particularly concerning given that JAX directors served as
directors or held interests in counterparties to the proposed
transaction at the time the proposed transaction was being
evaluated by the board."
- "As it stands, during the negotiation process and at the
time the merger agreement was approved by the board, certain
directors held interests in counterparties to the transaction that
may represent conflicts of interest, in our view. In particular,
four directors of the Company, Lonnie
Stout, Timothy Janszen,
Ronald Maggard and Frank Martire, also serve as directors of FNH or
served as directors of FNH during the negotiation process, and two
directors of the Company, Raymond
Quirk and Douglas Ammerman,
also serve as directors of Fidelity National Financial, Inc.
("FNF"), which was the parent of FNFV until November 2017."
- "We are somewhat concerned that the board does not appear to
have fully or proactively explored a range of potential strategic
alternatives for JAX before determining to proceed with the
proposed transaction. In this case, we do not believe the board has
taken sufficient steps to assure shareholders that the proposed
transaction likely represents the most favorable opportunity
available at the present time. We also note that the proposed
transaction includes a no-shop provision that restricts the
Company's ability to solicit alternative proposals or engage with
alternative parties regarding a potential acquisition of the
Company."
- "The proposed transaction also appears to contradict the
rationale cited by FNF in 2015 when it determined to spin-off JAX
while retaining 99 Restaurants, drawing into question the logic of
combining JAX and 99 Restaurants at this time, in our
view."
- "In addition, we question the strategic rationale for the
proposed merger of JAX and 99 Restaurants given that FNF previously
determined not to include 99 Restaurants in the 2015 spin-off of
JAX. At that time, FNF stated that spinning-off JAX would create a
separate upscale dining concepts business with greater management
flexibility and acknowledged that upscale dining involved different
valuation methodologies, capital requirements and marketing
efforts. In our view, the proposed merger of JAX and 99 Restaurants
would appear to contradict this rationale."
- ".…the deal would involve a change in control of JAX without
providing a meaningful control premium to shareholders."
- "…the transaction would also dilute the Company's focus on
the upscale dining industry and expose shareholders to significant
challenges facing the casual dining segment in which 99 Restaurants
operates."
*Marathon Partners has neither sought nor obtained consent
from Glass Lewis to use previously published information in this
press release.
Marathon Partners is being advised by Olshan Frome Wolosky LLP
in connection with its investment in J. Alexander's and its
opposition to the Company's acquisition of 99 Restaurants.
About Marathon Partners
Marathon Partners Equity
Management, LLC is a fundamental, research intensive
investment firm that deploys capital with a long-term investment
horizon.
Investor Contact
Mario
Cibelli
(212) 490-0399
http://www.marathonpartners.com
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SOURCE Marathon Partners Equity Management, LLC